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Singapore - A gauge of emerging-market shares rose to the highest in 11 months amid speculation policy makers in the US and Japan will maintain a favourable environment for higher-yielding assets when they meet this week.
China, South Korea and Turkey led gains as developing-nation equities extended a second monthly advance. Futures show there’s less than a 10% chance the Federal Reserve will boost interest rates when it announces its policy decision on Wednesday, while most economists predict the Bank of Japan will increase stimulus two days later.
Turkey’s lira strengthened for a fourth day, the longest winning streak since April.
“The yield searching environment is still going on among investors globally,”said Jeffrosenberg Tan, an associate director at PT Sinarmas Sekuritas in Jakarta. “The weakness in developed countries is actually a blessing in disguise for these developing economies,” though emerging markets still remain vulnerable to any major global stock selloff, he said.
Stocks
The MSCI Emerging Markets Index rose 0.3% to 871.45 as of 09:12 after reaching 873.11, the highest level since August 11. The gauge has rallied 4.5% this month after rising 3.3% in June. All of the 10 industry groups advanced except for energy and health-care shares.
Benchmark equity indexes rose 1.1% in China, 0.8% in Korea and 0.6% in Turkey.
This year’s rally in emerging-market stocks ran into resistance in the middle of July amid concern an improving US economy would prompt the Federal Open Market Committee to signal it remains on course to raise interest rates this year. Developing-nation currencies also struggled as an improving US economy boosted the dollar.
Currencies
The MSCI Emerging Markets Currency Index swung between gains and losses after falling for the previous two days. The gauge has advanced 4.4% this year.
The Turkish lira advanced 0.2% to 3.0303 after surging 1.7% during the previous three days. The currency slumped to a record-low 3.0973 on July 20 following a failed coup attempt led by sections of the armed forces.
Turkish assets gained Monday as Prime Minister Binali Yildirim said the government plans to set up a multibillion-dollar fund to support economic growth.
There’s only a 26% chance the Fed will raise rates by its September meeting and 48% odds by year-end, according to data on fed fund futures compiled by Bloomberg. Thirty-two of 41 respondents surveyed by Bloomberg forecast the Bank of Japan will ease monetary policy this week.
“The market is a bit cautious ahead of the FOMC,”said Qi Gao, a strategist in Singapore at Scotiabank. “But the Fed is less likely to tighten in the coming months and before December and ample external liquidity should be supportive of emerging Asian currencies after the FOMC and Bank of Japan meetings this week.”
